NovaGold, Teck Cominco Committed to Advance Galore Creek

NovaGold Resources Inc. (AMEX: NG) and Teck Cominco Ltd. (NYSE: TCK) announced a new management team to move the Galore Creek project through the next phase of optimization and reengineering. We believe that this demonstrates that both companies place value on the opportunity and are aligned in their focus to advance the Galore Creek project as quickly as possible.

As this is the first joint announcement on Galore Creek since Thanksgiving weekend, investors were drifting through the end of the 2007 waiting for some sense of direction amidst a period of fierce tax-loss selling. We note that some in the industry had discounted the project completely, which we thought was overdone, especially when considering that Teck was funding an additional $140 million to complete its earn-in to establish a 50% ownership position.

It is still too early to surmise the extent or areas that the new team will address in order to produce a “modified construction approach and execution plan.” We believe that there remains several areas for potential improvement which should be highlighted over the coming year with additional time for study. We are encouraged with the statement from Teck’s CEO, however that “clearly both NovaGold and Teck Cominco remain fully committed to unlocking the potential of the Galore Creek resource as rapidly as possible." We are also interested in additional drill results from the 2007 drill program, and further study of the overall waste management plan which may lead to improved pit design or reduction of the tailings facility. In addition, should this require some amendment of permits, the government will likely be brought back to the table, which may potentially lead to some participation with infrastructure or other assistance with project costs. While this additional study will take time, we suspect that banker’s long-term price assumptions may creep toward current forward curve price levels, providing some additional lift for their models.

It is important for investors to revisit the Galore Creek project’s contribution to value of NovaGold shares. While Galore Creek is being sorted out, we continue to believe the story for NovaGold and the mining industry itself may be Donlin Creek during 2008. We are looking for the compilation of the 2006 and 2007 drill programs into an update and upgrade of the resource. In addition, NovaGold and Barrick Gold Corporation (NYSE: ABX) are scheduled to produce a feasibility study mid-year to offer direction for an optimal approach to power and track for permitting. We suspect that the Donlin Creek project may exceed investor expectations by being less costly, and having a larger resource than investors anticipate.

Investors may not fully appreciate the contribution of Rock Creek reaching full production in 2Q08 and a resource upgrade at its Ambler project. We continue to believe that as scheduled events unfold in 2008, and additional insights are gained on Galore Creek the fundamental value underlying NovaGold shares will be fully demonstrated.

The author is long NG and has no positions in any other stocks mentioned in this report. An affiliate of the author's employer provides corporate advisory services to NG.

Comments

[REBEL]

Novagold is looking at a 30% - 50% rise due to very rich gold veins on their properties. This is based on production at their 3 smallest mines. When Galore Creek starts production a double in stock price from today's close is a very real possibility.